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Pimco warns of rating downgrade if Labour fails to act

Pimco has taken another swipe at the UK by claiming it will lose its sovereign credit rating if Labour wins this year’s election and does not take greater action on public debt.

According to reports, the American investment group, which runs the world’s largest bond fund, believe there is an 80 per cent chance of Britain losing its AAA rating should the Government fail to act.

Head of global portfolio management Scott Mather told Dow Jones Newswires that the current reduction plan is lacking in both conviction and details.

A downgrade would push up the borrowing to fund the £178bn of debt in the UK.

Treasury shadow chief secretary Philip Hammond says a downgrade would be terrible news for Britain. He says: “A credit rating downgrade for the UK means higher mortgage costs and higher borrowing costs – choking of the recovery and the creation of new jobs the country so desperately needs.”

Earlier this week Pimco revealed it is to shed holdings of both American and British treasury bonds due to the growing budget deficits.

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